<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended February 29, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE
EXCHANGE ACT
For the transition period from ______________ to _______________
Commission File No. 0-5954
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COMPUTER RESEARCH, INC.
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(Exact name of small business issuer as specified in its charter)
Pennsylvania 25-1201499
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(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.
Cherrington Corporate Center, Building 200, Coraopolis, Pennsylvania 15108
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(Address of principal executive offices)
(412) 262-4430
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes _____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
4,014,300
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<PAGE> 2
PART I - FINANCIAL STATEMENTS
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ITEM I
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A. COMPUTER RESEARCH, INC. BALANCE SHEET
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February 29, 1996 and August 31, 1995
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ASSETS
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<TABLE>
<CAPTION>
FEBRUARY 29, AUGUST 31,
1996 1995
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<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $1,624,906 $ 873,508
Accounts Receivable - Trade
(net of allowance for doubtful accounts
of $45,000 and $30,000 at 2/29/96 and
8/31/95 respectively) 929,776 776,099
Inventories
(first-in, first-out) or market 88,390 80,518
Prepaid Expenses 78,464 75,911
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Total Current Assets 2,721,536 1,806,036
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EQUIPMENT and LEASEHOLD IMPROVEMENTS - At Cost
Data Processing Equipment 4,315,535 4,255,912
Data Processing Equipment Under Capital Leases 162,031 104,339
Other 811,977 798,889
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5,289,543 5,159,140
Less Accumulated Depreciation and Amortization 4,948,748 4,879,610
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340,795 279,530
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OTHER ASSETS 3,901 1,341
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$3,066,232 $2,086,907
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 3
A. COMPUTER RESEARCH, INC. BALANCE SHEET - CONT'D.
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February 29, 1996 and August 31, 1995
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LIABILITIES
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<TABLE>
<CAPTION>
FEBRUARY 29, AUGUST 31,
1996 1995
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<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note Payable to Bank $ - $ 25,000
Current Portion of Long-Term Obligations 77,917 45,852
Accounts Payable 139,083 82,057
Accrued Payroll 237,909 157,036
Accrued Income Taxes 155,000 27,500
Accrued Vacation 305,220 281,720
Customer Deposits 109,935 70,350
Accrued Rent 115,638 103,847
Accrued Lease Obligation 17,080 20,204
Other Current Liabilities 5,742 4,746
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Total Current Liabilities 1,163,524 818,312
LONG-TERM OBLIGATIONS 37,493 35,885
ACCRUED LEASE OBLIGATION 10,929 17,909
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Total Liabilities 1,211,946 872,106
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COMMITMENTS
STOCKHOLDERS' EQUITY
- --------------------
Common Stock - No Par Value; $.0008 Stated Value;
5,000,000 Shares Authorized; 4,014,300 and
3,887,895 Shares Issued and Outstanding
at 2/29/96 and 8/31/95, Respectively 3,211 3,110
Additional Paid-In Capital 744,361 715,842
Retained Earnings 1,106,714 495,849
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Total Stockholders' Equity 1,854,286 1,214,801
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$3,066,232 $2,086,907
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
B. COMPUTER RESEARCH, INC. CAPITALIZATION AND STOCKHOLDERS' EQUITY
---------------------------------------------------------------
February 29, 1996
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<TABLE>
<CAPTION>
DEBT AMOUNT
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<S> <C> <C>
Short-Term Loans, Notes $ -
Long-Term Debt (Including $77,917 due within one year) 115,410
----------
Total Debt $ 115,410
==========
STOCKHOLDERS' EQUITY
- --------------------
SHARES ISSUED AMOUNT
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Preferred Stock -0-
Common Stock 4,014,300 $ 3,211
Capital in Excess of Par Value 744,361
Retained Earnings -
Balance at Beginning of Current Fiscal Year 495,849
Net Income for Period 610,865
----------
1,106,714
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Total Stockholders' Equity $1,854,286
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
C. COMPUTER RESEARCH, INC. STATEMENT OF INCOME
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For the Six Months Ended February 29, 1996 and 1995
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<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
REVENUES
- --------
Sales of Services $3,678,635 $2,795,050
Sales of Equipment, Software and Supplies 19,596 8,393
Rental Income From Operating Leases 20,640 24,905
Other Income 39,148 21,326
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3,758,019 2,849,674
COSTS AND EXPENSES
- ------------------
Operating Expenses 1,973,256 1,852,870
Selling and Administrative Expenses 934,053 841,602
Depreciation and Amortization 69,138 41,794
Cost of Equipment, Software and Supplies Sold 13,955 3,027
Interest Expense 6,752 5,599
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2,997,154 2,744,892
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INCOME BEFORE INCOME TAXES 760,865 104,782
LESS: PROVISION FOR INCOME TAXES 150,000 -
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NET INCOME $ 610,865 $ 104,782
========== ==========
Average Number of Shares Outstanding 4,014,300 3,879,895
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Earnings Per Common Share $ .15 $ .03
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DIVIDENDS PER COMMON SHARE $ - $ -
========== ==========
</TABLE>
The results for the period ended February 29, 1996, are not necessarily
indicative of the results to be expected for the year. All known adjustments
necessary for a fair presentation of the financial information of the Company
have been reflected for the six months ended February 29, 1996.
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
C. COMPUTER RESEARCH, INC. STATEMENT OF INCOME
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For the Fiscal Second Quarter Ended February 29, 1996 and 1995
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<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
REVENUES
- --------
Sales of Services $1,920,796 $1,461,128
Sales of Equipment, Software and Supplies 19,065 4,810
Rental Income From Operating Leases 9,075 12,140
Other Income 23,395 14,042
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1,972,331 1,492,120
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COSTS AND EXPENSES
- ------------------
Operating Expenses 1,019,709 965,299
Selling and Administrative Expenses 471,870 427,757
Depreciation and Amortization 45,976 21,086
Cost of Equipment, Software and Supplies Sold 13,955 1,625
Interest Expense 3,042 3,743
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1,554,552 1,419,510
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INCOME BEFORE INCOME TAXES 417,779 72,610
LESS: PROVISION FOR INCOME TAXES 85,000 -
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NET INCOME $ 332,779 $ 72,610
========== ==========
Average Number of Shares Outstanding 4,014,300 3,879,895
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Earnings Per Common Share $ .08 $ .02
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DIVIDENDS PER COMMON SHARE $ - $ -
========== ==========
</TABLE>
The results for the period ended February 29, 1996, are not necessarily
indicative of the results to be expected for the year. All known adjustments
necessary for a fair presentation of the financial information of the Company
have been reflected for the three months ended February 29, 1996.
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
D. COMPUTER RESEARCH, INC. STATEMENT OF CASH FLOWS
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For the Six Months Ended February 29, 1996 and 1995
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<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
(USED) BY OPERATING ACTIVITIES:
Net Income $ 610,865 $ 104,782
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ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation and Amortization 69,138 41,794
Provision for Losses on Doubtful Accounts 15,000 -
Change in Assets and Liabilities:
Accounts Receivable (168,677) (258,465)
Inventories (7,872) (54,005)
Prepaid Expenses (2,553) (31,653)
Other Assets (2,560) 2,027
Accounts Payable, Accrued Expenses and
Other Current Liabilities 301,686 13,287
Customer Deposits 39,585 73,939
Accrued Lease Obligation (10,104) (50,330)
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Total Adjustments 233,643 (263,406)
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Net Cash (Used In) Provided by Operating Activities 844,508 (158,624)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Equipment and Leasehold Improvements (72,711) (28,502)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Stock 28,620 2,852
Proceeds From Line of Credit - 100,000
Payments on Capital Lease Obligations (24,019) (3,134)
Payments on Line of Credit (25,000) (85,000)
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Net Cash Provided by (Used In) Financing
Activities (20,399) 14,718
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Net Increase (Decrease) in Cash 751,398 (172,408)
Cash and Cash Equivalents at August 31, 1995 and 1994 873,508 691,881
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Cash and Cash Equivalents at February 29, 1996 and 1995 $1,624,906 $ 519,473
========== ==========
CASH PAID DURING THE PERIOD
- ---------------------------
2/29/96 2/28/95
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Interest $ 6,752 $ 5,599
========== ==========
Income Taxes $ 22,500 $ -
========== ==========
</TABLE>
Supplemental Schedule of Noncash Investing and Financing Activities
- -------------------------------------------------------------------
For the six months ended February 29, 1996, the Company entered into a capital
lease for the purchase of new equipment for $57,692.
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 8
COMPUTER RESEARCH, INC.
-----------------------
NOTES TO FINANCIAL STATEMENTS
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SIX MONTHS ENDED FEBRUARY 29, 1996
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NOTE A - COMPANY'S ANNUAL REPORT UNDER FORM 10-KSB
- --------------------------------------------------
The accompanying financial information should be read in conjunction
with the Company's 1995 Annual Report on Form 10-KSB.
NOTE B - ADJUSTMENTS
- --------------------
In the opinion of management, all adjustments that were made, which are
necessary to a fair statement of the results for the interim periods,
were of a normal and recurring nature.
9
<PAGE> 9
ITEM 2
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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1. CAPITAL RESOURCES AND LIQUIDITY
-------------------------------
Due to the relatively stable operating costs of the data
processing service business, the working capital requirements of
the Company are normally predictable. As a result of net
operating profits generated by the Company, cash and cash
equivalents on hand have increased by approximately $750,000 for
the first six months of the current year to a total of
approximately $1,600,000. The management of the Company is
confident that cash on hand, along with revenues generated by
existing clients, will satisfy the operating requirements of the
Company for the foreseeable future. In addition, if needed, the
Company has a $750,000 line of credit available for future use.
During the second half of the 1997 fiscal year, the Company
intends to complete an ongoing project to have the software of
its product line operational on IBM computer equipment. At that
time, the Company will have the option to purchase computer
processing time from an outside supplier or if cost justified,
purchase and install IBM computer equipment of its own for its
service business.
2. RESULTS OF OPERATIONS
---------------------
REVENUES
--------
The revenues for the first six months of the current year were
approximately $3,758,000 which represents an increase of
approximately 32% over the first six months of the previous year.
This increase is primarily attributable to additional revenues
generated by banking clients utilizing the Company's data
services.
The revenues for the second quarter of the current fiscal year
were approximately $1,972,000 which represented an increase of
approximately 32% over the comparable period of the previous
year. Additional service revenues from banking clients were
primarily the reason for this increase.
10
<PAGE> 10
In March 1996, the Company and Wachovia Operational Services
Corporation, an affiliate of a major service client that
accounted for 10% or more of consolidated revenue, entered into
an agreement to convert the Company's production software from
its existing hardware platform to operate on an IBM AS/400
configuration. Upon successful completion of the project, which
is anticipated to occur in the second half of the Company's 1997
fiscal year, the Company intends to license the software to third
parties for in-house utilization. The licensing of the software
to Wachovia Operational Services Corporation may result in a
reduction of service fees from the major client in the 1998
fiscal year. However, the conversion of the Company's existing
software to the IBM AS/400 configuration will enhance the
Company's ability to secure software license revenues.
Management believes the ability to generate software license
revenues and continued growth in recurring revenues from existing
clients will serve to offset any decrease in revenues that might
occur.
COSTS AND EXPENSES
------------------
The total costs and expenses for the first six months of the
current year were approximately $2,997,000 which represented an
increase of approximately 10% over the comparable period of the
previous year. An allocation of Company funds to an employee
profit sharing plan, in addition to the cost of an additional
computer configuration installed at the beginning of the current
year, were the primary causes for the increase.
The total costs and expenses for the fiscal second quarter of the
current year were approximately $1,555,000 which represents an
increase of 10% over the comparable period of the previous year.
NET INCOME
----------
The net income for the first six months of the current fiscal
year was $610,865 or earnings of $.15 per share. For the first
six months of the previous year, net income was $104,782 or
earnings of $.03 per share.
The net income for the second quarter of the current fiscal year
was $332,779 or earnings of $.08 per share as compared to $72,610
or earnings of $.02 per share for the comparable period of the
previous year.
11
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 4
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SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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The annual meeting of stockholders of the Company was held on January
30, 1996. The following persons were elected to serve as the Company's Board
of Directors until the next annual meeting of stockholders:
James L. Schultz
David J. Vagnoni
Lynn M. Bushman
Virgil J. Falco
David K. Klotz
SIGNATURES
COMPUTER RESEARCH, INC.
------------------------------------
(Registrant)
Date 4/15/96 /s/ JAMES L. SCHULTZ
-------------------- ------------------------------------
James L. Schultz, President & Treasurer
12
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000201511
<NAME> COMPUTER RESEARCH, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> FEB-29-1996
<CASH> 1,624,906
<SECURITIES> 0
<RECEIVABLES> 974,776
<ALLOWANCES> 45,000
<INVENTORY> 88,390
<CURRENT-ASSETS> 2,721,536
<PP&E> 5,289,543
<DEPRECIATION> 4,948,748
<TOTAL-ASSETS> 3,066,232
<CURRENT-LIABILITIES> 1,163,524
<BONDS> 115,410
<COMMON> 3,211
0
0
<OTHER-SE> 1,851,075
<TOTAL-LIABILITY-AND-EQUITY> 3,066,232
<SALES> 19,596
<TOTAL-REVENUES> 3,758,019
<CGS> 13,955
<TOTAL-COSTS> 2,997,154
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 15,000
<INTEREST-EXPENSE> 6,752
<INCOME-PRETAX> 760,865
<INCOME-TAX> 150,000
<INCOME-CONTINUING> 610,865
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 610,865
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
